Trustee also pursuing $11b in assets to repay some clients

The trustee in the Bernard Madoff bankruptcy case said he expects to approve $100 million in claims by Memorial Day to repay victims of the investment scheme, and he continues to pursue about $11 billion in additional funds from some Madoff customers, to redistribute to others who lost money.

Irving H. Picard, the trustee charged with finding assets to repay Madoff victims, said in a conference call with reporters yesterday that he has received 8,848 customer claims to date. His office has so far identified $1 billion in assets that can be returned to victims and has filed six lawsuits seeking to recover another $10.1 billion.

The trustee this week sued philanthropist and longtime Madoff friend Jeffry M. Picower, head of the now-shuttered Picower Foundation, which lost all of its money in the scandal. The lawsuit alleged the foundation received at least $5 billion in fictitious profits from Madoff over a 20-year period - money invested by other customers, rather than actual profits. And, Picard alleged, Picower "knew or should have known" of the fraud, because of some outlandish investment gains and wide swings in performance.

"In several cases, defendants' purported annual rates of return were more than 100 percent, with some annual returns as high as 500 percent or even 950 percent per year," according to the complaint.

The Picowers deny they knew anything about the multibillion-dollar fraud. Picower and his wife's foundation ran nearly $1 billion and was a major donor to the Massachusetts Institute of Technology and Harvard Medical School.

The Picower lawsuit put other large Madoff clients on notice, as Picard made his biggest move yet on a client for either knowingly taking fraudulent profits or negligently looking the other way. "These anomalous and astronomical rates of return - both positive and negative - were neither credible nor consistent with legitimate trading activity, and should have caused any reasonable investor to inquire further," the complaint said.

Brenda R. Sharton, a partner at the law firm Goodwin Procter in Boston, called the returns alleged in the Picower complaint "staggering."She said of the foundation, "The level of returns and the amount of money taken out might have made them an attractive target for the trustee."

But Picard again stated that the nonprofits that received donations from Madoff investors (like Picower) will likely escape his scrutiny.

He said US bankruptcy code limits his ability to go after such money - although some lawyers say that is not the case. Generally, Picard said, "We're not going to bring lawsuits against parties, people, where it's clear we're not going to make any recoveries. That's just not an appropriate way to move forward."

However, Picard's willingness to pursue the Picower Foundation raises questions about another large nonprofit run by an old friend of Madoff's, Boston philanthropist Carl Shapiro. The Carl and Ruth Shapiro Family Foundation, a major funder to such local institutions as Brigham and Women's Hospital, and Brandeis University, lost nearly half its assets, or roughly $145 million, to Madoff. Prior to the collapse, the foundation reported making a fortune by investing with Madoff as far back as the 1960s. Carl Shapiro gave Madoff an additional $250 million when he asked for it, two weeks before Madoff's Dec. 11 arrest.

A spokesman for the Shapiros declined to comment on whether Picard had requested money back from the family or its foundation.

Picard said he is negotiating with a number of people and entities, and expects "significant settlements" in the coming weeks. He would not say whether those were parties whom he had already sued. He added talks include people who have not yet received a so-called clawback letter, which asks clients to return funds that belong to other Madoff investors.

About 233 clawback letters were sent out several weeks ago, demanding the return of funds. Most of those letters, Picard explained for the first time, went to Madoff family members and employees of the firm and their relatives. A smaller group of letters went out earlier to "feeder" funds - hedge funds that packaged large sums from investors and sent them to Madoff to invest. One of those was Tremont Group Holdings Inc., a Rye, N.Y., hedge fund group owned by Springfield insurer Massachusetts Mutual Life Insurance Co. Tremont lost $3.3 billion to Madoff.

Picard said his office would send out additional clawback letters as necessary.

He also sought to assure victims that the costs of his investigation and legal work would not be paid out of customer assets. Those costs will be covered by the insurance fund paying claims of up to $500,000 per investor, the Securities Investor Protection Corp.